Company Quick10K Filing
Remedent
Price0.30 EPS0
Shares20 P/E3
MCap6 P/FCF11
Net Debt-0 EBIT2
TEV6 TEV/EBIT3
TTM 2019-09-30, in MM, except price, ratios
10-Q 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-K 2019-03-31 Filed 2019-06-28
10-Q 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-K 2018-03-31 Filed 2018-07-13
10-Q 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-K 2017-03-31 Filed 2017-06-29
10-Q 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-K 2016-03-31 Filed 2016-06-29
10-Q 2015-12-31 Filed 2016-02-16
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-K 2015-03-31 Filed 2015-06-29
10-Q 2014-12-31 Filed 2015-02-23
10-Q 2014-09-30 Filed 2014-11-19
10-Q 2014-06-30 Filed 2014-08-19
10-K 2014-03-31 Filed 2014-07-14
10-Q 2013-12-31 Filed 2014-02-14
10-Q 2013-09-30 Filed 2013-11-19
10-Q 2013-06-30 Filed 2013-08-14
10-K 2013-03-31 Filed 2013-07-15
10-Q 2012-06-30 Filed 2012-08-14
10-K 2012-03-31 Filed 2012-07-16
10-Q 2011-09-30 Filed 2011-11-21
10-Q 2011-06-30 Filed 2011-08-15
10-K 2011-03-31 Filed 2011-07-14
10-Q 2010-12-31 Filed 2011-02-14
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-K 2010-03-31 Filed 2010-07-13
10-Q 2009-12-31 Filed 2010-02-16

REMI 10Q Quarterly Report

Part I - Financial Information
Item 1.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. [Removed and Reserved]
Item 5. Other Information
Item 6. Exhibits
EX-31.1 v430826_ex31-1.htm
EX-31.2 v430826_ex31-2.htm
EX-32.1 v430826_ex32-1.htm
EX-32.2 v430826_ex32-2.htm

Remedent Earnings 2015-12-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
10.07.95.93.81.8-0.32012201420172020
Rev, G Profit, Net Income
1.71.20.60.1-0.5-1.02012201420172020
Ops, Inv, Fin

10-Q 1 v430826_10q.htm FORM 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended December 31, 2015

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____.

 

Commission File No. 001-15975

 

REMEDENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada   86-0837251

(State or Other Jurisdiction

Of Incorporation or Organization)

 

(I.R.S. Employer Identification

Number)

     
Zuiderlaan 1-3 bus 8, 9000 Ghent, Belgium   N/A
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code 011 32 9 241 58 80

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes x                                 No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x                                   No ¨

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer ¨ Smaller reporting company x
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨                                 No x

The number of common shares of registrant’s stock outstanding as of February 16, 2016 was 19,995,969.

 

 

 

 

REMEDENT, INC.

 

FORM 10-Q INDEX

 

    Page Number
     
PART I – FINANCIAL INFORMATION    
Item 1.  Financial Statements    
Consolidated Balance Sheets as of December 31, 2015 (Unaudited) and March 31, 2015   3
Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2015 and December 31, 2014 (Unaudited)   4
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2015 and December 31, 2014 (Unaudited)   5
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2015 and December 31, 2014 (Unaudited)   6
Notes to Consolidated Financial Statements (Unaudited)   7
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations   18
Item 3.  Quantitative and Qualitative Disclosures About Market Risk   20
Item 4.  Controls and Procedures   20
     
PART II – OTHER INFORMATION    
Item 1.     Legal Proceedings   22
Item 1A.  Risk Factors   22
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds   22
Item 3.     Defaults Upon Senior Securities   22
Item 4.     [Removed and Reserved.]   22
Item 5.     Other Information   22
Item 6.     Exhibits   23
Signature Page   24

 

 2 

 

 

PART I – FINANCIAL INFORMATION

Item 1.

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2015   March 31, 2015 
   (unaudited)     
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $166,948   $399,149 
Accounts receivable, net of allowance for doubtful accounts of $50,551 at December 31, 2015 and $50,089 at March 31, 2015   1,009,297    847,144 
Other receivable   1,150,000    1,150,000 
Inventories, net   401,860    414,034 
Prepaid expense   173,776    96,461 
Total current assets   2,901,881    2,906,788 
           
PROPERTY AND EQUIPMENT, NET   428,788    435,268 
OTHER ASSETS          
Investment in GlamSmile Asia Ltd   1,581,569    1,366,813 
Investment in MFI (Note 3)   828,828    828,828 
Patents, net   164    7,099 
Total assets  $5,741,230   $5,544,796 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
CURRENT LIABILITIES:          
Current portion, long term debt  $2,210,139   $2,172,467 
Accounts payable   756,671    846,773 
Accrued liabilities   287,419    334,748 
Deferred revenue   89,497    87,747 
Total current liabilities   3,343,726    3,441,735 
           
EQUITY:          
Preferred Stock $0.001 par value (10,000,000 shares authorized, none issued and outstanding)        
Common stock, $0.001 par value; (50,000,000 shares authorized, 19,995,969 shares issued and outstanding at December 31, 2015 and March 31, 2015 respectively)   19,996    19,996 
Treasury stock, at cost; 723,000 shares outstanding at December 31, 2015 and March 31, 2015 respectively   (831,450)   (831,450)
Additional paid-in capital   24,906,269    24,906,269 
Accumulated deficit   (20,699,956)   (20,974,904)
Accumulated other comprehensive (loss) (foreign currency translation adjustment)   (1,189,641)   (1,185,097)
Obligation to issue shares (Note 3)   97,500    97,500 
Total Remedent, Inc. stockholders’ equity   2,302,718    2,032,314 
Non-controlling interest   94,786    70,747 
Total stockholders’ equity   2,397,504    2,103,061 
Total liabilities and equity  $5,741,230   $5,544,796 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 3 

 

 

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the three months ended
December 31,
   For the nine months ended
December 31,
 
   2015   2014   2015   2014 
                 
Net sales  $662,438   $849,004   $2,182,021   $2,630,982 
Cost of sales   194,652    315,179    660,796    883,454 
Gross profit   467,786    533,825    1,521,225    1,747,528 
Operating Expenses                    
Research and development   3,523    21,952    8,753    61,121 
Sales and marketing   161,521    155,792    343,361    588,732 
General and administrative   288,021    235,618    819,845    853,278 
Depreciation and amortization   38,874    61,802    118,754    180,071 
TOTAL OPERATING EXPENSES   491,939    475,164    1,290,713    1,683,202 
INCOME FROM OPERATIONS   (24,153)   58,661    230,512    64,326 
OTHER INCOME (EXPENSES)                    
Equity income from investments   65,534    (33,420)   214,756    95,711 
Interest expense   (15,453)   (17,544)   (47,918)   (53,070)
Interest / Other income   980    5,015    8,731    60,164 
Other deductions   (312)   (1,386)   (2,082)   (723)
TOTAL OTHER INCOME (EXPENSES)   50,749    (47,335)   173,487    102,082 
NET INCOME BEFORE TAXES AND NON-CONTROLLING INTEREST   26,596    11,326    403,999    166,408 
PROVISION FOR INCOME TAXES   (1,321)   (578)   (105,013)   (578)
INCOME FROM CONTINUING OPERATIONS BEFORE NON-CONTROLLING INTEREST, NET OF TAX   25,275    10,748    298,986    165,830 
NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST   1,614    4,942   24,038    17,188
                     
NET INCOME ATTRIBUTABLE TO REMEDENT INC. COMMON SHAREHOLDERS  $23,661   $5,806  $274,948   $148,642 
                     
 INCOME PER SHARE                    
Basic  $0.00   $0.00   $0.01   $0.01 
Fully diluted  $0.00   $0.00   $0.01   $0.01 
WEIGHTED AVERAGE SHARES OUTSTANDING                    
Basic   19,995,969    19,995,969    19,995,969    19,995,969 
Fully diluted   19,995,969    19,995,969    19,995,969    19,995,969 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 4 

 

  

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

   For the three months ended
December 31,
   For the nine months ended
December 31,
 
   2015   2014   2015   2014 
Net Income  $23,661   $5,806   $274,948   $148,642 
OTHER COMPREHENSIVE INCOME (LOSS):                    
Foreign currency translation adjustment   6,537    (123,578)   (4,544)   (134,659)
COMPREHENSIVE INCOME  $30,198   $(117,772)  $270,404   $13,983 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 5 

 

 

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the nine months ended
December 31,
 
   2015   2014 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income  $274,948   $148,642 
Adjustments to reconcile net income to net cash used by operating activities          
Depreciation and amortization   118,754    180,071 
Inventory reserve   (62,656)   (65,683)
Allowance for doubtful accounts   462    (6,529)
Equity investment   (214,756)   (95,711)
Changes in operating assets and liabilities:          
Accounts receivable   (162,153)   (31,630)
Inventories   12,174    95,938 
Prepaid expenses   (77,315)   (178,627)
Accounts payable   (81,185)   188,635 
Accrued liabilities   (47,329)   (275,964)
Due to related parties       (106,823)
Deferred revenue   1,756    (8,405)
Net cash used by operating activities   (237,300)   (156,086)
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of equipment   (23,962)   (74,221)
Net cash used by investing activities   (23,962)   (74,221)
CASH FLOWS FROM FINANCING ACTIVITIES          
Net (repayments of) capital leases and notes payable   37,672    (97,265)
(Repayments of) line of credit       (251,861)
Net cash provided by (used by) financing activities   37,672    (349,126)
NET (DECREASE) IN CASH   (223,590)   (579,433)
Effect of exchange rate changes on cash and cash equivalents   (8,611)   (98,712)
CASH AND CASH EQUIVALENTS, BEGINNING   399,149    775,286 
CASH AND CASH EQUIVALENTS, ENDING  $166,948   $97,141 
Supplemental Information:          
Interest paid  $10,245   $15,398 
Income taxes paid  $   $ 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 6 

 

 

REMEDENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION

 

The Company is a manufacturer and distributor of cosmetic dentistry products, including a full line of professional dental tooth whitening products which are distributed in Europe, Asia and the United States. The Company manufactures many of its products in Ghent, Belgium as well as outsourced manufacturing in its facility in Beijing, China.  The Company distributes its products using both its own internal sales force and through the use of third party distributors.

 

In these notes, the terms “Remedent”, “Company”, “we”, “us” or “our” mean Remedent, Inc. and all of its subsidiaries, whose operations are included in these consolidated financial statements.

 

The Company’s financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

 

These financial statements of the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Despite the net profit for the accounting years ending March 31, 2015 and March 31, 2014, the accumulated losses of the past affect the financial situation of the Company. The continuation of the Company as a going concern is dependent upon the Company’s ability to continue to generate profitable operations. As of December 31, 2015 the Company had a working capital deficit of $441,845, and an accumulated deficit of $20,699,954. Additional funding may be required in order to support the Company’s operations and the execution of its business plan.

 

There can be no assurance that the Company will be successful in raising the required capital or that it will ultimately attain a successful level of operations. These risks, among others, are also discussed in ITEM 1A – Risk Factors in the Company’s annual report on Form 10-K filed on June 29, 2015 with the SEC.

 

The Company has conducted a subsequent events review through the date the financial statements were issued, and has concluded that there were no subsequent events requiring adjustments or additional disclosures to the Company's financial statements at December 31, 2015.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein are substantially the same as presented in the Company’s Form 10-K for the year ended March 31, 2015, except as may be indicated below:

 

The accompanying consolidated financial statements include the accounts of: Remedent N.V. (incorporated in Belgium) located in Ghent, Belgium, Remedent Professional, Inc. and Remedent Professional Holdings, Inc. (both incorporated in California and inactive), Glamtech-USA, Inc. (a Delaware corporation acquired effective August 24, 2008), Remedent N.V.’s 50 % owned subsidiary, Biotech Dental Benelux N.V., a Belgium private company located in Ghent, Remedent N.V.’s 51% owned subsidiary, GlamSmile Deutschland GmbH, a German private company located in Munich (effective March 31, 2014 this subsidiary is inactive) and Remedent N.V.’s 80 % owned subsidiary, GlamSmile Rome, an Italian private company located in Rome (effective March 31, 2014 this subsidiary is inactive).

 

Remedent N.V.’s 21.51 % investment in Glamsmile Dental Technology Ltd., a Cayman Islands company (“Glamsmile Dental”) and its subsidiaries, Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong and a substantially 100 % owned subsidiary of Glamsmile Dental, Beijing Glamsmile Technology Development Ltd., a 100% owned subsidiary or GlamSmile Asia, its 80% owned subsidiary Beijing Glamsmile Trading Co., Ltd. and its 98% owned subsidiary Beijing Glamsmile Dental Clinic Co., Ltd., including its 100% owned Shanghai Glamsmile Dental Clinic Co., Ltd., its 100% owned Guangzhou Dental Clinic Co., Ltd. and its 50% owned Whenzhou GlamSmile Dental Clinic Ltd., which are accounted for using the equity method after January 31, 2012 (see Note 3 – Long-term Investments)

 

Remedent, Inc. is a holding company with headquarters in Ghent, Belgium. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant since inception.

 

For all periods presented, all significant inter-company accounts and transactions have been eliminated in the consolidated financial statements and corporate administrative costs are not allocated to subsidiaries.

 

 7 

 

 

Interim Financial Information

 

The interim consolidated financial statements of Remedent, Inc. and Subsidiaries (the “Company”) are condensed and do not include some of the information necessary to obtain a complete understanding of the financial data. Management believes that all adjustments necessary for a fair presentation of results have been included in the unaudited consolidated financial statements for the interim periods presented. Operating results for the three and nine months ended December 31, 2015, are not necessarily indicative of the results that may be expected for the year ended March 31, 2016. Accordingly, your attention is directed to footnote disclosures found in the Annual Report on Form 10-K for the year ending March 31, 2015, and particularly to Note 2, which includes a summary of significant accounting policies.

 

Warranties

 

The Company typically warrants its products against defects in material and workmanship for a period of 24 months from shipment.

 

A tabular reconciliation of the Company’s aggregate product warranty liability for the reporting periods is as follows:

 

   Nine months
ended
December 31, 
2015
   Year ended
March 31, 2015
 
Product warranty liability:          
Opening balance  $5,421   $6,899 
Accruals for product warranties issued in the period   49    (1,478)
Ending liability  $5,470   $5,421 

 

Based upon historical trends and warranties provided by the Company’s suppliers and sub-contractors, the Company has made a provision for warranty costs of $5,470 and $5,421 as of December 31, 2015 and March 31, 2015, respectively.

 

Computation of Earnings (Loss) per Share

 

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) per common share attributable to common stockholders assuming dilution is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued.

  

On April 1, 2009, the Company adopted changes issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The adoption of this change had no impact on the Company’s basic or diluted net loss per share because the Company has never issued any share-based awards that contain non-forfeitable rights.

 

At each of December 31, 2015 and March 31, 2015, the Company had 19,995,969, shares of common stock issued and outstanding.  At December 31, 2015 and March 31, 2015, the Company did not have any warrants outstanding but had 1,582,500 and 1,582,500 options outstanding respectively.  

 

Further, pursuant to ASC 260-10-50-1(c), if a fully diluted share calculation was computed for the three and six month periods ended December 31, 2015 and December 31, 2014 respectively, it would have excluded all options respectively since the Company’s average share trading price during the three month and nine month periods ended December 31, 2015 and December 31, 2014 were less than the exercise price of all options.

 

Conversion of Foreign Currencies

 

The reporting and functional currency for the consolidated financial statements of the Company is the U.S. dollar. The home currency for the Company’s European subsidiaries, Remedent N.V., Biotech Dental Benelux N.V.,GlamSmile Rome and GlamSmile Deutschland GmbH, is the Euro, for Glamsmile Asia Ltd., and its subsidiaries, the Hong Kong dollar and the Chinese Renmimbi (“RMB”) for Mainland China. The assets and liabilities of companies whose functional currency is other that the U.S. dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income of such companies are translated at the average exchange rates during the applicable period. Translation gains or losses are accumulated as a separate component of stockholders’ equity.

 

 8 

 

 

Comprehensive Income (Loss)

 

The Company’s only component of other comprehensive income is the accumulated foreign currency translation consisting of (loss) and gains of $(4,544) and $(134,659) for the nine months ended December 31, 2015 and 2014, respectively. These amounts have been recorded as a separate component of stockholders’ equity (deficit).

 

New Accounting Pronouncements

 

Recent Accounting Pronouncements Not Yet Adopted

 

In January 2016, the FASB issued ASU 2016-01 (ASC Subtopic 825-10), Financial Instruments- Overall Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU require entities to measure all investments in equity securities at fair value with changes recognized through net income. This requirement does not apply to investments that qualify for the equity method of accounting, to those that result in consolidation of the investee, or for which the entity meets a practicability exception to fair value measurement. Additionally, the amendments eliminate certain disclosure requirements related to financial instruments measured at amortized cost and add disclosures related to the measurement categories of financial assets and financial liabilities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for only certain portions of the ASU. The Company is in the process of assessing the impact, if any, on its consolidated financial statements.

 

In November 2015, the FASB issued ASU 2015-17 (ASC Topic 740), Income Taxes Balance Sheet Classification of Deferred Taxes. The amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted by all entities as of the beginning of an interim or annual reporting period. We are currently evaluating the impact of the new guidance however we do not expect its application to have a significant impact upon our consolidated financial statements.

 

In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments," which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. These changes become effective for the Company's fiscal year beginning April 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.

    

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company's fiscal year beginning April 1, 2018. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.

 

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest ("ASU 2015-03"), which requires that transaction costs related to the issuance of debt be deducted from the carrying value of the financial liability and not recorded as separate assets. ASU 2015-03 will become effective for the Company on April 1, 2016 and early adoption is permitted. The guidance is to be applied on a retrospective basis. We are currently evaluating the impact of the new guidance however we do not expect its application to have a significant impact upon our consolidated financial statements.

 

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis," which amends the consolidation requirements in ASC 810. These changes become effective for the Company's fiscal year beginning April 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.    

 

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20), which eliminates the concept of extraordinary items from GAAP as part of its simplification initiative. The ASU does not affect disclosure guidance for events or transactions that are unusual in nature or infrequent in their occurrence. The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2015. These changes become effective for the Company's fiscal year beginning April 1, 2016.The ASU allows prospective or retrospective application. The Company does not expect the adoption of this amendment to have a material impact on its consolidated financial statements.

 

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The ASU requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” This ASU is effective for annual periods ending after December 15, 2017, and interim periods thereafter; early adoption is permitted. The Company does not expect the adoption of this amendment to have a material impact on its consolidated financial statements.

 

 9 

 

 

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. In July 2015, the FASB voted to defer the effective date of this ASU for one year, revising the effective date for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate the adoption of this ASU will have a material impact on its consolidated financial statements.

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. The new standard will become effective for the Company on April 1, 2018 and the Company has the option to adopt it effective April 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected an adoption date, a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

3.LONG-TERM INVESTMENTS

 

  GLAMSMILE ASIA LTD.

 

Acquisition

 

Effective January 1, 2010 the Company acquired 50.98% of the issued and outstanding shares of Glamsmile Asia Ltd. (“Glamsmile Asia” or “Glamsmile”), a private Hong Kong company, with subsidiaries in Hong Kong and Mainland China, in exchange for the following consideration:

 

  1. 325,000 Euro (US$466,725).  As of March 31, 2011 the full amount was paid.
  2. 250,000 shares of common stock to be issued during the fiscal year ended March 31, 2011 ($97,500 was recorded as an obligation to issue shares as at March 31, 2010).  The parties have agreed that the shares will be issued during fiscal year ended March 31, 2015.
  3. 100,000 options on closing (issued);
  4. 100,000 options per opened store at closing (issued);
  5. 100,000 options for each additional store opened before the end of 2011 at the price of the opening date of the store;
  6. Assumption of Glamsmile’s January 1, 2010 deficit of $73,302; and
  7. Repayment of the founding shareholder’s original advances in the amount of $196,599.  The balance of $196,599, recorded as due to related parties at March 31, 2010, is unsecured, non-interest bearing and has no specific terms of repayment other than it will be paid out of revenues from Glamsmile, as working capital allows.  During the year ended March 31, 2011 a total of $101,245 was paid to the founding shareholder, leaving a balance due of $95,354 on June 27, 2011. As at March 31, 2012 the full amount was paid.

 

All options reside under the Company’s option plan and are five year options.

 

Also pursuant to the agreement, the Company granted irrevocable right to Glamsmile Asia to use the Glamsmile trademark in Greater China.

 

The Company acquired a 50.98% interest in GlamSmile Asia Ltd. (“GlamSmile Asia”) in order to obtain a platform in the Chinese Market to expand and introduce our GlamSmile Asia concept into the Chinese Market. In order to sell into the Chinese Market, an approval by Chinese Authorities is required, in the form of licenses. As GlamSmile Asia was already the owner of such licenses prior to the acquisition, this was an important advantage. We obtained control of GlamSmile Asia through the acquisition of the 50.98% interest and the appointment of our CEO as a Board member of GlamSmile Asia.

 

On January 30, 2014, the Company has sold a total of 2,500,000 ordinary shares of its investment in GlamSmile Dental Technology Ltd for $3,000,000 and recognized a gain on the sale in the amount of $1,582,597. As of March 31, 2014 the Company has received $1,850,000 and has recorded the balance of $1,150,000 as an amount receivable.

 

Effective March 31, 2014 the Company has retained a 21.51% ownership in GlamSmile Asia Ltd. 

 

 10 

 

 

Deconsolidation

 

On January 28, 2012, the Company entered into a Preference A Shares and Preference A-1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile Dental Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental, Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd., and Shanghai Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”), and IDG-Accel China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”) and Crown Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”), pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares for an aggregate purchase price of $5,000,000.

 

Under the terms of the Share Purchase Agreement, the Company agreed (a) to indemnify the Investors and their respective affiliates for losses arising out of a breach, or inaccuracy or misrepresentation in any representation or warranty made by the Company or a breach or violation of a covenant or agreement made by the Company for up to $1,500,000, and (b) to transfer 500,000 shares of Glamsmile Dental owned by the Company to the Investors in the event of breach of certain covenants by the Company. In connection with the Share Purchase Agreement, the Company also agreed to enter into an Investor’s Rights Agreement, Right of First Refusal and Co-Sale Agreement, and Voting Agreement with the parties.

 

In addition, in connection with the contemplated transactions in the Share Purchase Agreement on January 20, 2012, the Company entered into a Distribution, License and Manufacturing Agreement with Glamsmile Dental pursuant to which the Company appointed Glamsmile Dental as the exclusive distributor and licensee of Glamsmile Veneer Products bearing the “Glamsmile” name and mark in the B2C Market in the People’s Republic of China (including Hong Kong and Macau) and Republic of China (Taiwan) and granted related manufacturing rights and licenses in exchange for the original issuance of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental and $250,000 (the receipt of which was acknowledged as an offset to payment of certain invoices of Glamsmile (Asia) Limited).

 

On February 10, 2012, the sale of the Preference A-1 Shares and the Preference A Shares was completed. As a result of the closing, the equity ownership of Glamsmile Dental, on an as converted basis, is as follows: 31.4% by the Investors, 39.2 % by Gallant, and 29.4% by the Company. Mr. De Vreese, our chairman, will remain as a director of Glamsmile Dental along with Mr. David Lok, who is the Chief Executive Officer and director of Glamsmile Dental and principal of Gallant. The Investors have a right to appoint one director of Glamsmile Dental, and accordingly the Board of Directors of Glamsmile Dental will consist of Mr. De Vreese, Mr. Lok and a director appointed by the Investors.

 

In conjunction with the transaction and resulting deconsolidation of Glamsmile Dental, the Company recorded a gain of $1,470,776, calculated as follows:

 

Consideration received  $2,000,000 
Fair value of 29.4% interest   2,055,884 
Carrying value of non-controlling interest   1,117,938 
Less: carrying value of former subsidiary’s net assets   (2,002,329)
Goodwill   (699,635)
Investment China & Hong Kong   (1,082)
Rescission agreement  Excelsior  (Note 11)   (1,000,000)
   $1,470,776 

 

For the nine month periods ended December 31, 2015 and December 31, 2014 the Company recorded equity income of $214,756 and $95,711 respectively as “Other income” for its portion of the net income recorded by GlamSmile Dental Technology Ltd.

 

MEDICAL FRANCHISES & INVESTMENTS

 

Effective March 31, 2013, the Company acquired 6.12 % of the issued and outstanding shares of Medical Franchises & Investments N.V., a Belgium corporation ("MFI NV") in exchange for a cash prepayment of $314,778 that was made during the fiscal year ended March 31, 2012. The Company’s investment in 70,334 shares of MFI NV has been recorded at the fair value of $787,339 which is the quoted market price of approximately USD $11.19 (€8.70) per share. Future unrealized gains and losses on the investment in MFI will also be recognized in other comprehensive income until realized.

 

Per ASC-320-10-25-1, investments in debt and equity securities that have readily determinable fair values and are not classified as trading or held-to-maturity securities, are classified as available-for-sale securities.

 

MFI NV has been founded to market an advance in dental technology which has the potential to replace the process of making mechanical impressions of teeth and bite structures with a digital/optical scan.

 

 11 

 

 

4. SHORT TERM LOAN

 

Effective December 3, 2012, the Company entered into a Loan Agreement (the “Loan Agreement”) with BNP Paribas Fortis Bank, a Belgian Bank, pursuant to which the Company borrowed $132,820 (€100.000). The loan bears interest of 3.68% per annum and is repayable in 24 equal monthly installments of € 4,331 ($5,154 at the closing rate of December 31, 2014). As of December 17, 2014 the loan was fully repaid.

 

5.  CONCENTRATION OF RISK

 

Financial Instruments — Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.

 

Concentrations of credit risk with respect to trade receivables are normally limited due to the number of customers comprising the Company’s customer base and their dispersion across different geographic areas.  At December 31, 2015, five customers accounted for 52.13% of the Company’s trade accounts receivables, and two customers accounted for 34.41%.  At December 31, 2014, five customers accounted for 67.82% of the Company’s trade accounts receivables, and two customers accounted for 55.58%.   The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.

 

Purchases — The Company has diversified its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact on the Company’s operations.  For the nine months ended December 31, 2015 the Company had five suppliers who accounted for 28.89% of accounts payable. For the nine months ended December 31, 2014 the Company had five suppliers who accounted for 32.79% of accounts payable.

 

Revenues —  For the nine months ended December 31, 2015 the Company had five customers that accounted for 70.12% of total revenues. One of the five customers accounted for 40.70% of total revenues. For the nine months ended December 31, 2014 the Company had five customers that accounted for 55.68% of total revenues. One of the five customers accounted for 36.12% of total revenues.

 

6. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

 

The Company’s accounts receivable at period end were as follows:

 

   December 31,
2015
   March 31, 2015 
Accounts receivable, gross  $1,059,848   $897,233 
Less: allowance for doubtful accounts   (50,551)   (50,089)
Accounts receivable, net  $1,009,297   $847,144 

 

7.  INVENTORIES

 

Inventories at period end are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:

 

   December 31,
2015
   March 31, 2015 
Raw materials  $16,455   $17,683 
Components   134,279    169,855 
Finished goods   593,994    621,428 
    744,728    808,966 
Less: reserve for obsolescence   (342,868)   (394,932)
Net inventory  $401,860   $414,034 

 

 12 

 

 

8.  PREPAID EXPENSES

 

Prepaid expenses are summarized as follows:

 

   December 31,
2015
   March 31, 2015 
Prepaid materials and components  $82,058   $23,849 
VAT payments in excess of VAT receipts   16,645    28,163 
Prepaid consulting   40,540     
Prepaid trade show expenses        207 
Prepaid rent   25,866    29,813 
Other   8,667    14,429 
   $173,776   $96,461 

 

9.  PROPERTY AND EQUIPMENT

 

Property and equipment are summarized as follows:

 

   December 31,
2015
   March 31, 2015 
Furniture and Fixtures  $468,156   $466,374 
Machinery and Equipment   2,044,612    1,947,878 
    2,512,768    2,414,252 
Accumulated depreciation   (2,083,980)   (1,978,984)
Property & equipment, net  $428,788   $435,268 

 

10. LINE OF CREDIT

 

The Company has a mixed-use line of credit facility with BNP Paribas Fortis Bank, a Belgian bank (the “Facility”). The Facility was secured by a first lien on the assets of Remedent N.V. and by personal guarantee of the Company’s CEO. Effective September 3, 2013 we agreed to repay our line of credit of € 495.000 (US $589,050) in 10 installments of € 49.500 (US $58,905) and interest of 3.6 % per year commencing November 1, 2013, with the last payment due on July 31, 2014. The loan was completely repaid in July 2014 and all securities were released by the bank in January 2015.

 

11. LONG TERM DEBT

 

Capital Lease Agreements:

 

On January 15, 2010, the Company entered into a capital lease agreement over a 5 year period for veneer manufacturing equipment totaling €251,903 (US $273,088).

 

The lease requires a monthly payment of principal and interest at 9.72% and provide for a buyout at the conclusion of the lease terms of 4% of the original value of the contract. Effective March 31, 2015 the capital lease was fully paid.

 

The net book value as of March 31, 2015 and March 31, 2014 of the equipment subject to the foregoing lease was $Nil and $77,943 respectively as the contract was fully concluded at March 31, 2015.

 

Secured Debt Agreements (1)

 

On June 3, 2011, the Company obtained a loan in the principal amount of $1,000,000 (the “Loan”) from an unrelated private company, Excelsior Medical (HK) (“EM”). In connection with the Loan, the Company issued a promissory note, with a simple interest rate of 5% per annum, secured by certain assets of the Company (the “Note”). The maturity date of the Loan is June 3, 2014. Interest of $50,000 per annum is payable in cash on an annual basis. The Company is currently in the process of renegotiating the terms of repayment.

 

 13 

 

 

Effective as of January 11, 2012, the Company entered into a Rescission Agreement with EM and Asia Best Healthcare Co., Ltd. Under the Rescission Agreement, the Company agreed to repay a total of $1,000,000 received under the Distribution Agreement, plus a simple interest rate of 5%, beginning on June 30, 2012, according to the following payment schedule: (i) $250,000 to be paid no later than June 30, 2012, (ii) $250,000 plus interest on June 30, 2012, (iii) $250,000 plus interest on December 31, 2012, and (iv) $250,000 plus interest on June 30, 2013. The Company also agreed to secure such obligations owed to EM with certain collateral of the Company. During the period ended December 31, 2012 a partial payment of $20,000 in interest has been made. The Company is currently in the process of re-negotiating the terms of repayment.

 

Secured Debt Agreements (2)

 

On December 3, 2012, the Company obtained a loan in the principal amount of € 100,000 (the “Loan”) from BNP Paribas Fortis bank, to be repaid over the next 24 months. The loan is secured by a lien on the assets of Remedent N.V. as already granted for the use of our existing Credit Line Facility. The maturity date of the Loan was December 17, 2014 at an interest rate of 3.68% to be repaid in monthly installments of € 4,331 ($5,154). The loan was fully repaid as of December 17, 2014.

 

12. DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS

 

Transactions with related parties not disclosed elsewhere in these financial statements consisted of the following:

 

Compensation:

 

During the nine month periods ended December 31, 2015 and 2014 respectively, the Company incurred $116,167 and $160,619 respectively, as compensation for all directors and officers.

 

All related party transactions involving provision of services or tangible assets were recorded at the exchange amount, which is the value established and agreed to by the related parties and reflects arms’ length consideration payable for similar services or transfers.

 

13. ACCRUED LIABILITIES

 

Accrued liabilities are summarized as follows:

 

   December 31,
 2015
   March 31, 2015 
Accrued employee benefit taxes and payroll  $127,209   $244,486 
Accrued travel   5,470    5,421 
Commissions       97 
Accrued VAT   2,569     
Accrued income taxes   125,646     
Accrued audit and tax preparation fees   8,048    19,480 
Reserve for warranty costs   5,470    5,421 
Accrued interest       6,554 
Accrued consulting fees   5,000    1,500 
Other accrued expenses   8,007    51,789 
   $287,419   $334,748 

 

14. EQUITY COMPENSATION PLANS

 

As of December 31, 2015, the Company had two equity compensation plans approved by its stockholders (1) the 2004 Incentive and Non-statutory Stock Option Plan (the “2004 Plan”); and (2) the 2007 Equity Incentive Plan (the “2007 Plan”). The Company’s approved the 2004 Plan reserving 800,000 shares of common stock of the Company pursuant to an Information Statement on Schedule 14C filed with the Commission on May 9, 2005.  Finally, the Company’s stockholders approved the 2007 Plan reserving 1,000,000 shares of common stock of the Company pursuant to a Definitive Proxy Statement on Schedule 14A filed with the Commission on October 2, 2007.

 

In addition to the equity compensation plans approved by the Company’s stockholders, the Company has issued options and warrants to individuals pursuant to individual compensation plans not approved by our stockholders.  These options and warrants have been issued in exchange for services or goods received by the Company.

 

The following table provides aggregate information as of December 31, 2015 with respect to all compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance.

 

 14 

 

  

   2004 Plan   2007 Plan   Other 
   Outstanding
Options
   Weighted
Average
Exercise
Price
   Outstanding
Options
   Weighted
Average
Exercise
Price
   Outstanding
Options
   Weighted
Average
Exercise
Price
 
                         
Options outstanding and exercisable March 31, 2015 and
   432,500   $0.96    1,000,000   $1.21    150,000   $0.97 
Options expired   (75,000)                       
Options outstanding and exercisable December 31, 2015   357,500   $0.50    1,000,000   $1.21    150,000   $0.97 
Exercise price range  $0.50        $1.21        $1.75      
Weighted average remaining life   2.25  years         2.37 years         0.81 years      

  

A summary of the Company’s equity compensation plans approved and not approved by shareholders is as follows:

 

Plan Category  Number of
securities to
be
issued upon
exercise of
of
outstanding
options,
warrants
and rights
   Weighted-average
exercise price of
outstanding
options
warrants and
rights
   Number of
securities
remaining
available for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
 
Equity Compensation Plans approved by security holders   1,445,000   $1.17    605,000 
Equity Compensation Plans not approved by security holders   820,000   $.97    NA 
Total   2,265,000   $1.10    605,000 

  

For the nine month periods ended December 31, 2015 and December 31, 2014 the Company recognized $Nil and $Nil in stock based compensation expense in the consolidated statement of operations.  No stock options were granted or cancelled/expired in the nine month periods ended December 31, 2015 and December 31, 2014.

 

15. SEGMENT INFORMATION

 

The Company’s only operating segment consists of dental products and oral hygiene products sold by Remedent Inc., Remedent N.V., and Biotech Dental Benelux N.V. Our operations are primarily in Europe and Asia and 100% of our sales for the nine month periods ended December 31, 2015 and 2014 were generated from customers outside of the United States.

 

16. COMMITMENTS

 

Real Estate Lease:

 

The Company leases an office facility of 5,187 square feet in Gent, Belgium from an unrelated party pursuant to a nine year lease commencing September 1, 2008 at a base rent of €5,712 per month for the total location ($6,249 per month at December 31, 2015).

 

 15 

 

 

 

Secondly, the Company leases an office facility of 635 square feet in Brussels, Belgium from an unrelated party pursuant to a nine year lease commencing July 1, 2012 at a base rent of €969 per month for the total location ($1,060 per month at December 31, 2015).

 

Real Estate Lease and All Other Leased Equipment:

 

Minimum monthly lease payments for real estate, and all other leased equipment are as follows based upon the conversion rate for the (Euro) at December 31, 2015:

 

March 31, 2016  $37,924 
March 31, 2017   118,552 
March 31, 2018   56,524 
March 31, 2019   24,056 
March 31, 2020   23,557 
Balance   16,486 
Total:  $277,099 

 

17. FINANCIAL INSTRUMENTS

 

The FASB ASC topic 820 on fair value measurement and disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

 

The carrying values and fair values of our financial instruments are as follows:

 

       December 31, 2015   March 31, 2015 
       Carrying   Fair   Carrying   Fair 
   Level   Value   Value   value   value 
Cash   1   $166,948   $166,948   $399,149   $399,149 
Accounts receivable   2   $1,009,297   $847,144   $847,144   $847,144 
Long Term investment and advance - GlamSmile Dental Technology Asia   2   $1,581,569   $1,366,813   $1,366,813   $1,366,813 
Long term investments and advances MFI   1   $828,828   $828,828   $828,828   $828,828 
Short term debt   2   $2,210,139   $2,210,139   $2,172,467   $2,172,467 
Deferred revenue   2   $89,497   $87,741   $87,747   $87,747 
Accounts payable   2   $756,669   $846,773   $846,773   $846,773 
Accrued liabilities   2   $287,419   $334,748   $334,748   $334,748 

 

The following method was used to estimate the fair values of our financial instruments:

 

The carrying amount of level 1 and level 2 financial instruments approximates fair value because of the short maturity of the instruments.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation.

 

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no significant transfers between Level 1, Level 2, or Level 3 during the six month period ended December 31, 2015. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table provides a reconciliation of the beginning and ending balances of the item measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3):

 

 16 

 

 

   Nine month period ended 
December 31,
2015
 
Long term investments and advances:     
Beginning balance  $1,366,813 
Gains (losses) included in net loss   214,756 
Transfers in (out of level 3)    
      
Ending balance  $1,581,569 

 

 17 

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

The discussion contained herein is for the three and nine months ended December 31, 2015 and December 31, 2014. The following discussion should be read in conjunction with the Company’s consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015.  In addition to historical information, this section contains “forward-looking” statements, including statements regarding the growth of product lines, optimism regarding the business, expanding sales and other statements. Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual results could vary materially from the description contained herein due to many factors including continued market acceptance of our products. In addition, actual results could vary materially based on changes or slower growth in the oral care and cosmetic dentistry products market; the potential inability to realize expected benefits and synergies; domestic and international business and economic conditions; changes in the dental industry; unexpected difficulties in penetrating the oral care and cosmetic dentistry products market; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or technological changes; technological advances; shortages of manufacturing capacity; future production variables impacting excess inventory and other risk factors.  Factors that could cause or contribute to any differences are discussed in “Risk Factors” and elsewhere in the Company’s annual report on Form 10-K filed on June 29, 2015 with the Securities and Exchange Commission.  Except as required by applicable law or regulation, the Company undertakes no obligation to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015. The information contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015 is not a complete description of the Company’s business or the risks associated with an investment in the Company’s common stock. Each reader should carefully review and consider the various disclosures made by the Company in this Quarterly Report on Form 10-Q and in the Company’s other filings with the Securities and Exchange Commission.

 

Overview

 

We specialize in the research, development, and manufacturing of oral care and cosmetic dentistry products.  We are one of the leading manufacturers of cosmetic dentistry products in Europe.  Leveraging our knowledge of regulatory requirements regarding dental products and management’s experience in the needs of the professional dental community, we design, develop, manufacture and distribute our cosmetic dentistry products, including a full line of professional dental products that are distributed in Europe, Asia and the United States.  We distribute our products using both our own internal sales force and through the use of third party distributors.

  

Results of Operations

 

Comparative detail of results as a percentage of sales is as follows:

 

   For the three months ended
December 31,
   For the nine months ended
December 31,
 
   2015   2014   2015   2014 
                 
NET SALES   100.00%   100.00%   100.00%   100.00%
COST OF SALES   29.38%   37.12%   30.28%   33.58%
GROSS PROFIT   70.62%   62.88%   69.72%   66.42%
OPERATING EXPENSES                    
Research and development   0.53%   2.59%   0.40%   2.32%
Sales and marketing   24.38%   18.35%   15.74%   22.38%
General and administrative   43.48%   27.75%   37.57%   32.43%
Depreciation and amortization   5.87%   7.28%   5.44%   6.84%
TOTAL OPERATING EXPENSES   74.26%   55.97%   59.15%   63.98%
INCOME (LOSS) FROM OPERATIONS   (3,65)%   6.91%   10.56%   2.44%
Other income   7.66%   (5.58)%   7.95%   3.88%
INCOME (LOSS) BEFORE INCOME TAXES   4.01%   1.33%   18.51%   6.32%
Income taxes   (0.20)%   (0.07)%   (4.81)%   (0.02)%
NET INCOME   3.82%   1.26%   13.70%   6.30%
NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST   0.24%   0.58%   1.10%   0.65%
NET INCOME (LOSS) ATTRIBUTABLE TO REMEDENT INC. COMMON SHAREHOLDERS   3.57%   0.68%   12.60%   5.65%

 

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Net Sales

 

Net sales decreased by approximately 22% to $662,438 for the three months ended December 31, 2015 as compared to $849,004 for the three months ended December 31, 2014.  The decrease in sales is primarily due to the impact of the exchange rate of the US dollar (USD) versus the Euro. Currently 100% of our sales are generated outside of the USA and all our sales are invoiced in Euros. In comparing our results in Euros, total sales decreased by 8.61% to €601,478 for the three months ended December 31, 2015, as compared to €653,106 for the three months ended December 31, 2014.

 

Net sales decreased by approximately 17.1% to $2,182,021 for the nine months ended December 31, 2015 as compared to $2,630,982 for the nine months ended December 31, 2014. In comparing our results in Euros, total sales decreased by 2.7% to €2,095,353 for the nine months ended December 31, 2015, as compared to €2,151,377 for the nine months ended December 31, 2014.

 

Cost of Sales

 

Cost of sales decreased approximately 38.2% to $194,652 for the three months ended December 31, 2015 as compared to $315,179 for the three months ended December 31, 2014. Cost of sales, as a percentage of net sales, has decreased to 29.38% in the quarter ended December 31, 2015 as compared to 37.12 % in the quarter ended December 31, 2014. The decrease in cost of sales is primarily due to the impact of the exchange rate of the USD versus the Euro. In comparing our results in Euros, cost of sales decreased by33.6% to €152,932 for the three month period ended December 31, 2015 as compared to €204,345 for the three months ended December 31, 2014.  

 

Cost of sales decreased approximately 25.2% to $660,796 for the nine months ended December 31, 2015 as compared to $883,454 for the nine months ended December 31, 2014.  In comparing our results in Euros, cost of sales decreased by 5.9% to €514,435 for nine month period ended December 31, 2015 as compared to €544,931 for the nine months ended December 31, 2014. The decrease in cost of sales is because of more efficient and optimized production flows and processes.

 

Gross Profit

 

Our gross profit decreased by $66,039 or 12.4% to $467,786 for the three months ended December 31, 2015 as compared to $533,825 for the three months ended December 31, 2014. Our gross profit as a percentage of sales increased to 70.62% in the three months ended December 31, 2015 as compared to 62.88% for the three months ended December 31, 2014. Our gross profit decreased by $226,303 or 12.9%, to $1,521,225 for the nine months ended December 31, 2015 as compared to $1,747,528 for the nine months ended December 31, 2014 primarily because of the exchange rate effect.

 

Operating Expenses

 

Research and Development.  Our research and development expenses decreased by $18,429 to $3,523 for the three months ended December 31, 2015 as compared to $21,752 for the three months ended December 31, 2014, a decrease of 84%. The decrease in our research and development costs was primarily because of the finalization of our Software program the ‘Smile Me Mirror’.

 

Our research and development costs decreased by $18,429 or 85.7% to $8,753 for the nine months ended December 31, 2015 as compared to $61,121 for the nine months ended December 31, 2014 primarily because of the reason explained above.

 

Sales and marketing costs. Our sales and marketing costs for the three months ended December 31, 2015 and 2014 were $161,521 and $155,792 respectively, representing an increase of $5,729 or 3.7%.  The increase is largely due to increased sales force..

 

Our sales and marketing costs decreased by $245,371 or 41.7% to $343,361 for the nine months ended December 31, 2015 as compared to $588,732 for the nine months ended December 31, 2014. Costs decreased because we reduced our attendance at certain year end shows.

 

General and administrative costs. Our general and administrative costs for the three months ended December 31, 2015 and 2015 were $288,021 and $235,618 respectively, representing an increase of $52,403, or 22.2%. Our general and administrative costs for the nine months ended December 31, 2015 and 2014 were $819,845 and $853,728 respectively, representing a decrease of $33,433 or 3.9%.  The decrease in general and administration costs is largely due to increased synergy between our internal divisions as a result of ongoing internal reorganization.

 

Depreciation and amortization.   Our depreciation and amortization decreased by $22,928 or 37.1% to $38,874 for the three months ended December 31, 2015 as compared to $61,802 for the three months ended December 31, 2014.  Our depreciation and amortization decreased $61,317 or 34.1%, to $118,754 for the nine months ended December 31, 2015 as compared to $180,071 for the nine months ended December 31, 2014.   The decrease is because previous investments in machinery and equipment are now fully amortized.

 

Other income (expense).   Our net other income (expense) was $50,749 for the three months ended December 31, 2015 as compared to ($47,335) for the three months ended December 31, 2014, an increase in other income of $98,084.    The increase in other income was primarily because of decreased interest income offset by increased equity income from our investments. Our net other income increased by $71,407 to $173,489 for the nine months ended December 31, 2015 as compared to $102,082 for the nine months ended December 31, 2014, for the same reason as the three month variance.

 

Internal and External Sources of Liquidity

 

As of December 31, 2015, we had current assets of $2,901,881 compared to $2,906,788 at March 31, 2015. The decrease of $4,907 was due to a decrease in cash of $232,201 and a decrease in inventories of $12,174, offset by an increase in accounts receivable of $162,153 and an increase in prepaid expense of $71,315.

 

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As of December 31, 2015, we had cash of $166,948. We anticipate that we will need to raise additional funds to satisfy our working capital requirements and implement our business strategy to expand our direct to consumer business model. We intend to continue to look for opportunities to expand the number of GlamSmile Studios in Europe.  We will continue to review our expected cash requirements, make all efforts to collect any aged receivables, and take appropriate cost reduction measures to ensure that we have sufficient working capital to fund our operations. In the event additional needs for cash arise, we may seek to raise additional funds from a combination of sources including issuance of debt or equity securities. Additional financing may not be available on terms favorable to us, or at all. Any additional financing activity could be dilutive to our current stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

 

Cash and Cash equivalents

 

Our balance sheet at December 31, 2015 reflects cash of $166,948 as compared to $399,149 as of March 31, 2015, a decrease of $232,201.

 

Operations

 

Net cash used by operations was $237,300 for the nine months ended December 31, 2015 as compared to net cash used by operations of $156,086 for the nine months ended December 31, 2014. The increase of $81,166 in net cash used by operations for the nine months ended December 31, 2015 as compared to the nine months ended December 31, 2014 is primarily because of increased income of $126,308, decreased accrued liabilities of $228,635, decreased prepaid expenses of $101,312, and decreased amounts due to related parties of $106,823, all offset by a decrease in accounts payable of $269,820, an increase in equity investment of $119,045, an increase in accounts receivable of $130,523 and a decrease in depreciation and amortization of $61,317.

 

Investing activities

 

Net cash used in investing activities totaled $23,962 for the nine months ended December 31, 2015 as compared to net cash used by investing activities of $74,221 for the nine months ended December 31, 2014. Cash used in the nine months ended December 31, 2015 and 2014 was primarily for investing in equipment.

 

Financing activities

 

Net cash (used)/provided by financing activities totaled $37,672 for the nine months ended December 31, 2015, as compared to $(349,126) for the nine months ended December 31, 2014.  We used $49,126 in the nine months ended December 31, 2014 to completely repay our line of credit.

 

During the nine months ended December 31, 2015 and December 31, 2014, we recognized an increase/ (decrease) in cash and cash equivalents of $(8,611) and $(98,712), respectively, from the effect of exchange rates between the Euro and the US Dollar.

 

Off-Balance Sheet Arrangements

 

At December 31, 2015, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Not Applicable.

 

Item 4.  Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective, and management is required to exercise its judgment in evaluating the cost-benefit relationship of possible controls and procedures..

 

 20 

 

 

Management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015.  Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2015.

 

Changes in Internal Control Over Financial Reporting

 

There have been no material changes in our  internal controls over financial reporting identified in connection with the evaluation of disclosure controls and procedures discussed above that occurred during the quarter ended December 31, 2015 or subsequent to that date that have materially affected, or are reasonably likely to materially affect, our  internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

To the best knowledge of management, there are no material legal proceedings pending against the Company.

 

Item 1A. Risk Factors

 

Not Applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None. 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. [Removed and Reserved]

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

EXHIBIT INDEX

 

Exhibit No   Description
     
31.1*   Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act
     
31.2*   Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act
     
32.1*   Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act
     
32.2*   Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act
     
101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase

 

 

 

* Filed herewith

 

 23 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  REMEDENT, INC.
   
Date:    February 16, 2016 By: /s/ Guy De Vreese
    Name:  Guy De Vreese
   

Title:   Chief Executive Officer

            (Principal Executive Officer)

   
Date:    February 16, 2016 By: /s/ Philippe Van Acker
    Name:  Philippe Van Acker
   

Title:   Chief Financial Officer

            (Principal Financial and Accounting Officer)

 

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